fed (36)

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While main stream media does their level best to keep us hugging our equities, they seem to ignore the fact that quantitative easing ran the market up from 2009 and while the economy has come a long way since the bottom, maybe, just maybe, it's strong enough to sustain us, but not equities at elevated levels.

Federal Reserve officials have signaled they think the economy is robust enough to withstand a round of interest-rate rises starting this year. But the bond market still seems skeptical.

While yields on short-term Treasury notes have started moving higher in anticipation of an interest-rate increase as early as September, yields on longer-term debt have remained stubbornly low. That is a sign that many investors are still doubtful about the health of the economy, and the ability of the Fed to keep raising rates without jeopardizing growth.

On Tuesday, yields on short-term U.S. Treasury notes rose after a Fed official sounded the latest all clear for a rate rise as soon as Septembe

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Admin

BofAML When Will The Fed Raise Rates?

1291158?profile=RESIZE_1024x1024From BofAML's latest Global Fund Manager Survey: more than 50% of investors now expect Fed to lift off in Q3 or later.  Courtesy of MatthewB

Obviously June seems off the table.  Markets however, tend to bake in any moves long beforehand therefore remain long and accumulate banks and if you haven't already, lighten up on the utilities.  There's still money to be had; just in the right areas.

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Admin

Now Do You Believe? Sell In May Began Early

1291220?profile=RESIZE_1024x1024The majority of sector ETFs closed their week below their 50d with energy having filled the gap.....and found sellers waiting there.

SPX itself found sellers at $2100 (clearly we weren't the only ones selling) which is 17x earnings.  More and more are accepting reality that earnings have dropped the most in six years and the Fed (with no QE) will most likely begin to slowly raise interest rates in September.  Don't believe me, just ask Barclays.

  • US dollar found buyers at the 10week sma, prior support.  Yes, they're taking profits.  Will it continue?  It's nonetheless weighing on U.S. earnings.
  • China allowed further stocks to be shorted and talked of tightening margin lending.  They hit the sell button.
  • Utilities are being held by their 50d - won't raise much if rates are going up.
  • Transports are being held by their 20d bu the 50d is just overhead; waiting.
  • For months money has been flowing into overseas markets searching for yield.
  • Not to Greece though (although Putin le

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Admin

Looking Back At The Market

halloween-european-debt-crisis-political-cartoon.jpg?width=500The ECB left its key lending rates at record low levels, and the four-week moving average for initial claims is at an eight-year low.  That sounds like a pretty good setup for a stock market that worries about earnings prospects tied to a stronger dollar, loves the thought of central bank policy rates holding near the zero bound, and is anxious to see evidence the U.S. economy is gaining momentum.

Despite the setup, it has been a swing and a miss so far for the stock market, which has once again been greeted with steady, and broad-based, selling pressure.

ECB President Mario Draghi is getting a lot of blame for the disappointing price action based on reports that his presentation regarding the ECB's asset-backed securities purchase program was lacking and the impression from today's press conference that the ECB's ability to change the economic dynamic in the eurozone is also lacking.

There is some merit to the latter claim given the seeming lack of urgency to implement structural r

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Admin

Warren To Yellen - Do Your Job

Today during the Fed's testimony to the House Financial Services Committee, Liz Warren waited her turn patiently until the end of the day.  I just love Liz for saying it the way it is.  No holds barred.

After comparing Lehman at the time of it's collapse, LEH had $639 Billion in assets.  Today JPM has $2.5 Trillion (more than 4x LEH) in assets.  LEH had 209 subsidiaries.  Today JPM has.........are you ready for this...............3,391 subsidiaries!  Too big to fail?  Wowwww.

Then once done pointing out JPM's notably 15 times more subsidiaries than Lehman, Liz went on to question JPM's resolution plans to remain viable in case of a risk event.  Clearly determined to make one thing crystal clear to the Fed's Janice Yellen, she went on to say..............well, you watch the two minute clip.

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Admin

Fed To Regulate Insurers?

Moves today in AIG and MET to name a few may be based on speculation whether the Fed will move to regulate some insurers as "systemically important" which was previously discussed in this article on asset managers.  Under Dodd-Frank, the Financial Stability Oversight Council, a newly created super-regulator, can designate “systemically important financial institutions,” or SIFIs, and subject them to rules previously reserved for banks.  Steve Miller, AIG non-executive Chairman shares his view on CNBC.  Full disclosure StockBuz has previously recommended AIG long.

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Admin

Living on $20 Then And Now

Ouch that hurts10256560_676570759071250_8113680644823871129_n.jpg.  Luckily the Fed doesn't include food in their inflation data.  (yes, sarcasm) Seriously though in a day and age where companies can "afford" enormous CEO salary hikes, share repurchases and buybacks, it behooves me they continue to stomp their feet stating they cannot afford a minimum wage hike. 

Almost half of the states in the U.S. are already paying more than the federal minimum wage and those states are surviving just fine.  San Jose and Washington have seen expansion in small business and increased revenue with $10 minimum wages.  The propaganda has become ridiculous folks.  Just my .02

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Admin

TGIF Reads

  • This day in 1896: The Dow Jones Industrial Average is first published. Its 12 initial members are the great industrial giants of the time: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather, and U.S. Rubber. The index’s value that day: 40.94.  Source: Phyllis S. Pierce, ed., The Dow Jones Averages 1885-1980 (DowJones Irwin, Homewood, IL, 1982), introduction, not paginated; http://averages.dowjones.com and JasonZweig

  • Very odd the move in treasury yields today on the better than expected NFP number.  Maybe "smart money" is telling us the economy is not as strong as believed?  Extremely interesting to watch.  The Treasury market's reaction hasn't been more negative.  The 10-yr note, which was down 18 ticks shortly after the release, is now down just two ticks and yielding 2.62% (down roughly 40 bps since the end of 2013).  We still recommend ca

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Admin

Funday Monday Reads

  • EU added 7 rich men and 17 corporations to their list to sanction in Russia. Obama hits them with exports and the banking sector.  Market still not liking the tensions there. 

    Asked in his CNBC interview Wednesday whether Wall Street is right to remain calm over the standoff, Mr. Obama replied: “No.”“I think this time’s different,” he said. “I think they should be concerned…. When you have a situation in which a faction is willing potentially to default on U.S. government obligations then we are in trouble.  (WSJ)

  • Fed whisperer Hilsenrath says it's time to worry (WSJ)
  • If you're into experimental, cutting edge technologies, checkout this list of futuristic blogs by List.ly

  • Kyle Bass of Hayman Capital's presentation on "Global Outlook Pitfalls and Opportunities For 2014."

Kyle-Bass-Global-Outlook.pdf

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Admin

Larry Summers On QE And Fed Policy

1290321?profile=original

September is guaranteed to be packed with drama for the markets wall of worry.  As if Syrian tensions weren't scary enough.  Reuters outlines, not only will non-farm payrolls be highly important (will the Fed taper or no based on it) but German elections, Abe's 3rd phase of economic policy and of course, Obama's nomination for the next Fed Chairman.  (yes I'm completely ignoring the debt ceiling as a concern because it's not)

A few months back, it was Janet Yellen everyone felt would replace good old Ben Bernanke as the next Federal Reserve Chairman however as September nears, it's Larry Summers who has pulled away from the pack as the 5/2 odds on favorite, at least according to PaddyPower

Not being particularly interested in his resume bur rather what his views were on monetary policy and the like, I pulled these quotes from ft.com which should lend insight into Mr. Summer's beliefs on QE and Fed intervention.  Clearly he's slightly more hawkish when it comes to the use of QE.

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Admin

Under the category of "duh, no shit" comes a report from the St. Louis Fed office admitting what everyone already knew.  Typical households have not recovered from the credit crisis.  In fact, they're only halfway there.  Of course showing the full truth doesn't sell newspapers (or ad space).  The typical Joe who saw his job outsourced after 20 years with a company, 401k drained and whose kid (s) have moved back home because they can't afford to live on their own any long ALSO WHILE and working TWO wonderful $7.50 an hour jobs could've told the Fed that.  Seriously, how much do they pay these guys?  Read more-

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Admin

1290257?profile=originalWith market participants so concerned over the effects of if/when Bernanke takes his foot off of the QE gas pedal, here comes DB and BusinessInsider to remind us of historical market moves when rates were raised.  Based on monthly historical charts, you will notice a few 10-20% corrections however nothing earth shattering.  The markets found a floor based on true economic demand and continued their uptrend. 

As it stands, JPM believes the Fed will not being to taper until their December meeting unless labor improvements continue as they have the last six months; at which point then they look to the September meeting as the most obvious time (after Jackson Hole).  

Still, we need to forever bear in mind that markets are forward looking.  With Summer doldrums and money managers prepping for the1290279?profile=originalir getaways in the Hamptons, one has to wonder just when markets will begin to bake in a tapering of bond purchases at the very least.  Many eyes are also already watching the 10yr for signs of r

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Admin

Historically the week following June's triple witching options expiration has been "horrendous" according to StockTradersAlmanac.

In fact, in post-election years since 1953, June still ranks poorly and its average loss for DJIA and S&P 500 increases to –1.2% and –0.7% respectively compared to –0.3% and –0.01% in all years. DJIA in particular struggles, advancing in just three post-election year Junes (1977, 1985 and 1997). NASDAQ and Russell 2000 fare best in June, posting modest average gains.

Throw into the mix the concern that the Fed will be discussing possible avenues to ease off of the QE gas pedal at their June and July meetings and you have more reason to possibly see weakness as the Summer doldrums begin. 

The Monday of Triple-Witching Week the Dow has been down ten of the last sixteen years. Triple-Witching Friday is better, up seven of the last ten years, but mixed over the past 20 years, up eleven, down nine with an average loss of 0.3%. Full-week performance is choppy as w

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Admin

When Will The Fed Raise Rates?

The following from CalculatedRisk with my notes added as an afterthought:

Short answer: it is very unlikely that the Fed will increase the Fed funds rate this year. There are a series of steps the Fed will most likely take before raising rates1: • First the Fed needs to complete the $600 billion “QE2” large-scale asset purchase program. This is currently scheduled to be completed at the end of June, however, to “promote a smooth transition in markets”, it is possible the Fed will decide to "gradually slow the pace" of the purchases like they did with QE1 (quoted text from QE1 related FOMC statements). If the program is extended and purchases tapered off (but the size remains at $600 billion), this will probably be announced at the conclusion of the two day FOMC meeting in late April and the program will probably then be completed in August. • Next the Fed will end the reinvestment of maturing MBS and Treasury Securities. This could be concurrent with the end of QE2, or the Fed might wa

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